Safeway 2007 Annual Report Download - page 82

SAFEWAY INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company has adopted and implemented an investment policy for the defined benefit pension plans that incorporates
a strategic long-term asset allocation mix designed to meet the Company’s long-term pension requirements. This asset
allocation policy is reviewed annually and, on a regular basis, actual allocations are rebalanced to the prevailing targets.
The following table summarizes actual allocations for Safeway’s plans at year-end 2007 and year-end 2006:
Asset category Plan assets
Target 2007 2006
Equity 65% 67.8% 68.9%
Fixed income 35 31.8 30.7
Cash and other – 0.4 0.4
Total 100% 100.0% 100.0%
The investment policy also emphasizes the following key objectives: (1) maintain a diversified portfolio among asset
classes and investment styles; (2) maintain an acceptable level of risk in pursuit of long-term economic benefit;
(3) maximize the opportunity for value-added returns from active management; and (4) maintain adequate controls over
administrative costs.
To meet these objectives, the Company’s investment policy reflects the following major themes: (1) diversify holdings to
achieve broad coverage of both stock and bond markets; and (2) use active investment managers with disciplined, clearly
defined strategies, while establishing investment guidelines and monitoring procedures for each investment manager to
ensure the characteristics of the portfolio are consistent with the original investment mandate.
Expected rates of return on plan assets were developed by determining projected stock and bond returns and then
applying these returns to the target asset allocations of the employee benefit trusts, resulting in a weighted-average rate
of return on plan assets. Equity returns were based primarily on historical returns of the S&P 500 Index. Fixed-income
projected returns were based primarily on historical returns for the broad U.S. bond market.
Safeway expects to contribute approximately $35.6 million to its defined benefit pension plan trusts in 2008.
Underfunded plans
Year-end information for plans with accumulated benefit obligations in excess of plan assets (in millions):
2007 2006
Funded status:
Fair value of plan assets $ 649.3 $ 567.9
Projected benefit obligation (769.0) (672.1)
Funded status $ (119.7) $ (104.2)
Retirement Restoration Plan The Retirement Restoration Plan provides death benefits and supplemental income
payments for senior executives after retirement. The Company recognized expense of $4.8 million in 2007, $5.2 million in
2006 and $6.4 million in 2005. The aggregate projected benefit obligation of the Retirement Restoration Plan was
approximately $62.9 million at year-end 2007 and $57.0 million at year-end 2006.
Postretirement Benefits other than Pensions In addition to the Company’s retirement plans and the Retirement
Restoration Plan benefits, the Company sponsors plans that provide postretirement medical and life insurance benefits to
certain employees. Retirees share a portion of the cost of the postretirement medical plans. Safeway pays all the costs of
the life insurance plans. The plans are not funded.
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